car and truck expenses worksheet says Line 51 "depreciation allowed or allowable" and Line 52 "AMT depreciation allowed or allowable" is too large

[bk2007]

I'm getting an error in TurboTax on car and truck expenses worksheet that  says Line 51 "depreciation allowed or allowable" and Line 52 "AMT depreciation allowed or allowable is too large. For disposition calculations, depreciation cannot exceed business basis."

This amount is showing $48,300 which is the purchase price of the vehicle in 2015. I took an $8,000 Section 179 deduction on it the first year in 2015. The remaining $40,300 has been depreciated in years 2016-2020, so fully depreciated. It seems to me that $48,300 is the depreciation allowed as well as the business basis.

What I am doing wrong and how can I get rid of this error? It seems to be populated by Turbotax. Is that the incorrect amount or is it being flagged incorrectly?

[JamesG1]

In reporting the sale of the vehicle, was an entry made at the screen Let's get the info on your gain or loss basis?  This screen states:

If you got this vehicle by trading in listed property that you used less than 100% of the time for business, enter your gain or loss basis.

An entry made too large here may have triggered the message you received.

@bk2007

[AmeliesUncle · Accepted solution]

It sounds like the business percentage may have varied from year to year.  Assuming that is the case, TurboTax is NOT set to up report that.

You would need to say the vehicle is converted to personal use, then MANUALLY calculate things and enter the sale in the "Sale of Business Property" section.  Or go to a good tax professional this year.

[bk2007]

@JamesG1 I left those blank because I didn't think it applied so I'm not sure what's causing it?

[bk2007]

@AmeliesUncle Thank you for your response. It has been 100% every year and up until it was disposed of in February 2021 (unless that partial year is messing up the 100%)?

[bk2007]

@AmeliesUncle I did what you suggested and it worked perfectly. Thanks!

[sushir33]

I am running into the SAME exact problem. The vehicle was 100% business use for all years we had it. The total depreciation on line 51 is equal to the purchase price. We had section 179 expenses and depreciation that calculate to the correct amount. What did you do to resolve this problem? Any help would be appreciated!!!!

[bk2007]

I ended up deleting that vehicle completely Then, I went back and re-entered the information and put that it was converted to personal use on the questionnaire (as of the date it was traded in). Then, I showed it as a sale of a business property and entered the information there. It calculated the gain just as it would’ve the other way—without the error.

[mojo1880]

This is happening to me for tax year 2022.  If I convert it to personal property, where do I show that I sold it?

And do I deduct the trade-in amount against the price of the replacement?  And help would be appreciated.

[RobertB4444]

The trade in amount is the sale price for the vehicle.  You sold the property for that amount if you traded it for another business vehicle.  

The conversion to personal property is entered only if you have a variable business use rate for multiple years.  Then you would convert the vehicle to personal property and say nothing about the sale.  You would then enter a new item in sales of business property and you will need to manually figure out the basis of the portion of the vehicle that is business use and enter the sale with the trade in value as the sale price.

@mojo1880 

[mojo1880]

How do I figure out the basis?  And, while my % of business usage was not identical each year, it was within 1% or so the same.  Is this considered variable usage?

[AmyC]

Yes. Since the IRS changed trade-in rules in 2018, I recommend marking the business vehicle sold - at the trade-in price.

• If you took actual expenses, the amount of depreciation each year would change. Add up all the depreciation taken through the business ownership time and subtract it from your original basis.
• If you took the standard deduction, the depreciation is built into the mileage amount allowed and calculated separately.  The annual depreciation amount per year included in the Standard Mileage  per IRS Publication 463 (Page 23) Car Expenses
• 2012 - $0.23
• 2013 - $0.23
• 2014 - $0.24
• 2015 - $0.22
• 2016 - $0.24
• 2017 - $0.25
• 2018 - $0.25
• 2019 - $0.26
• 2020 - $0.27
• 2021 - $0.26
• 2022 - $0.26

Gather the mileage you claimed each year and multiply it by the depreciation amount.

Example: Bought a used car for $10,000 in 2019. Drove 5,000 miles in 2019, 1,200 in 2020, 1,500 in 2021 and 4,000 for 2022.

Using the depreciation chart above, calculate the depreciation for each year.

2019 = 5000 x 0.26 = $1300

2020 =1200 x 0.27 = $324

2021 = 1500 x 0.26 = $390

2022 = 4000 x 0.26 = $1040.

Total depreciation taken = 1300+324+390+1040 = $3054.

Basis of car sold = original cost of $10,000 minus depreciation taken of $3,054 = $6,946.

The gain or loss will be the difference between the basis and the sales price.

• Sell the car for $7,000 and have a capital gain of $54.
• Sell the car for $6,000 and have a capital loss of $946.

See: What is a capital gain or loss?

The new vehicle now stands on its own since the trade in value is being taxed. This is why the IRS changed the rules to simplify the chain with vehicles. If the new vehicle cost $25,000 minus trade in, the basis is $25,000. The trade in value is the sale price of the old car. You could have instead sold your car to a person, then used that same cash to buy the new vehicle. It no longer matters who you sold the car, person or dealership.

@mojo1880 

[mojo1880]

This is very helpful. I took actual expenses but I don't know how to find each year's depreciation.  I owned the car for 10 years.  I assume my original basis was the purchase price, minus its trade in.  Correct?

[KrisD15]

Depreciation is listed yearly on Form 4562 "Depreciation and Amortization". 

When you put a vehicle in service as a business asset, depreciation is taken based on the expected useful life of the asset. 

Cars are usually five years. 

Your original basis would be the purchase price. If the price was 35,000 that was the value to you, so that would be your basis. 

Whether you paid 35,000 cash, took a loan, or traded in something of value (your old vehicle)  or any combination still results in the car being worth 35,000 to you. That would be your basis. 

Depreciation would be based on that value/basis.

Depreciation can be computed several ways, such as "straight-line" which is equal amounts each year.  

There is also "Bonus Depreciation" allowing a larger amount to be taken the first year, and Section 179 which is a deduction which allows you to basically "Expense" part of the value. 

If you owned the car as a business asset for 10 years, reason says you used all the available depreciation. The car would have no value left. 

Whatever the Dealer gave you as a Trade-in value is what you sold the vehicle for. 

There was a time when business vehicles could be treated as Like-Kind exchanges, but that is only available for Real Estate now. 

So, whatever you paid less depreciation is subtracted from the sale price (in your case, the trade-in value)

If you paid 35,000 and depreciated fully 35,000 that leaves zero. If the Trade-in was 2,000, you have a 2,000 gain. 

Remember that this trade-in value is added to the value of the new vehicle. 

If you paid 48,000 cash plus traded in the old car for 2,000, your basis in the new vehicle is 50,000.

[mojo1880]

I am a real estate agent.  Will TT allow me to do a like-kind exchange?